Sometimes it seems as if you just can’t win. Take the case of this man in southern Brazil, who late last month was attacked by a group of bees while fishing with two friends. The man successfully escaped the bees by jumping into the lake — only to be eaten alive by piranhas.
Employers in California, you know what I mean, right? It seems like any way you turn, the laws of California will get you.
Well today I write with good news. There is still hope.
In a joint employment case brought under California law, the Ninth Circuit Court of Appeals handed Costco a win, ruling that Costco is not a joint employer of the supplier sales reps who ask you to taste that new brand of salsa, even under the strict rules of California Labor Code section 2810.3.
California has two flavors of joint employment: Spicy and Extra Spicy.
Extra spicy is Labor Code section 2810.3. It makes joint employment automatic when a “labor contractor” supplies workers to provides services within the client’s “usual course of business.” The workers at issue here were paid by a staffing agency and sent to Costco locations to offer samples of suppliers’ products on a consignment basis. The Court of Appeals ruled that was not part of the “usual course” of Costco’s business, so section 2810.3 did not apply.
Regular spicy is the Martinez v. Combs test. It says that an entity is a joint employer under California law if it (1) exercises control over wages, hours, or working conditions, or (2) “suffers or permits” the individual to work, or (3) “engages” the individual, meaning creates a common law employment relationship, not that you should have put a ring on it.
The Court gave Costco a pass here too, ruling that it didn’t do any of these three things either.
This case is a good reminder that it’s still possible for a companies to win joint employment claims in California. The key is to structure those relationships correctly and ensure you have robust contracts with suppliers of labor. For contracting tips, remember the Monster with Three Eyes.
All is not lost, even in California. Turns out that even the guy in Brazil might have had a chance. His two fishing buddies made it out of the lake alive.
Florence Ford was terrified of storms and, seeing as how she was born in 1861, none of the weather apps on her phone were working yet. Her mother Ellen provided comfort when the rains came. So naturally, when Florence died at age 10, Ellen felt she still needed to comfort her daughter when it rained.
In Natchez, Mississippi, you can visit one of the oddest graves in the world. Ellen fitted her daughter’s coffin with a small window and built stairs down to the casket. When it poured in Natchez, Ellen would head down to the casket and provide much-needed comfort to Florence’s bones.
Ellen couldn’t quite accept the reality of Florence’s death and tried to create an exception. In her version of death, reading or singing to the corpse still brought comfort to her daughter — or maybe just to herself.
A less creepy version of dueling realities continues to play out in California, as the legislature keeps reviving exceptions from the harshness of the ABC Test it adopted in AB 5.
The state continues to make tweaks. Two recent bills (AB 1506 and AB 1561) adopt these changes:
Extends the temporary exemption for newspaper publishers and distributors who meet certain criteria;
Imposes reporting requirements on publishers and distributors to ensure they are complying with the Borello Test, if they’re exempt from the ABC Test;
Extends the manicurists exemption for three more years (Kudos to the manicurists’ lobby! They nailed it!);
Extends the construction industry subcontractor exemption for another three years;
Amends the data aggregator exemption; and
Modifies the insurance exemption.
This grab bag of edits comes soon after the adoption of AB 2257, last fall, which rewrote AB 5 to change the long list of exemptions.
What’s going on here? The problem is that the ABC Test doesn’t make a lot of sense when you try to apply it across all types of working relationships. That’s why California’s ABC Test statute keeps getting a makeover. After the state legislature codified the ABC Test in September 2019 by passing AB 5, the state has adopted dozens and dozens of exceptions, and as you can see here, the list keeps growing.
Here’s what businesses in California need to remember:
The ABC Tests is still the default test for determining whether an independent contractor is misclassified and should really be an employee.
There are loads of exemptions, many of which are difficult to follow and require compliance with a long list of criteria before they will apply. Check the list of exemptions to see if they apply.
If an exemption applies, it does not mean that independent contractor status is proper. It just means you make the independent contractor vs. employee determination using the Borello balancing test instead of the ABC Test.
The rules keep changing.
If this monsoon of details makes you uncomfortable, it should. Fortunately, today you learned one more way that a person can find comfort in a storm. Thank you Ellen of Natchez.
In Return of the Living Dead, a warehouse owner accidentally reanimates some cadavers, who then become unkillable zombies. While not based on a true story, the 1985 film does have some parallels in real life (if you squint real hard and just go with it).
As discussed last week, copyright claims can also return from the dead when the author is an independent contractor. This week we discuss what can be done to avoid this zombie copyright scenario.
In the case of Horror Inc. v. Miller, the Second Circuit ruled that screenwriter Victor Miller could reclaim the copyright to Friday the 13th after 35 years, since he wrote the script as an independent contractor.
The case highlights a serious risk when retaining a writer as an independent contractor instead of as an employee. If a work is not a “work made for hire” under the U.S. Copyright Act, the author can reclaim a copyright 35 years after having transferred the rights away.
Horror, Inc. argued that Miller was an employee when he wrote the script, which made it a “work made for hire.” The court disagreed, but the rights holder should have had another argument in its back pocket – one that would have been much cleaner and could have changed the result of the case.
Employment is just one path for designating something a “work made for hire.” Another path toward the same designation is to have a “specially commissioned work.”
If Miller’s contract to write the movie had indicated that the movie was a specially commissioned work for use as part of a motion picture, it would not have mattered whether he was an employee or an independent contractor. The “specially commissioned work” designation would have made the work a “work made for hire” without getting into the messiness of employment, which would mean that Miller could not reclaim any rights after 35 years. This circular from the copyright office explains the “specially commissioned work” rule.
There are important lessons from this case for anyone seeking to engage a writer, whether it’s a freelancer or a script writer.
First, think through the implications of employee vs. independent contractor, not only in the context of employment law but also copyright law.
Second, consider a belt-and-suspenders approach. Even if the writer is your employee under labor law, the writer might not be your employee under U.S. Copyright Act — at least according to the Horror, Inc. case. Consider Plan B. You maybe able to designate the work a “specially commissioned work” or use one of the other definitions of a “work made for hire,” assuming that the facts fit within the definition.
But there are pitfalls to the second approach too. The California Labor Code says that if a work is a “work made for hire,” then the relationship between the writer and the acquirer is automatically employment, at least under certain provisions in the Labor Code. See Cal. Unemp. Ins. Code Section 686 and Cal. Lab. Code Section 3351.5(c).
If the California Economic Development Department (EDD) performs a misclassification audit, it will likely ask for all independent contractor agreements, and if a deliverable has been designated as a “work made for hire,” that may serve as conclusive proof of misclassification, with back assessments owed for failure to pay unemployment taxes.
You can get around the whole “work made for hire” issue by assigning the work, but that leaves the door open for the writer to reclaim the copyright after 35 years. And we’re right back where we started.
The independent contractor vs. employee decision has important implications in copyright law that are often overlooked. The Horror, Inc. case is a good reminder of some of the surprises that may arise many years later.
With Halloween around the corner, it’s scary movie season. Every year, various publications post what they claim is the definitive list of All-Time Scariest Movies. Go ahead, google it.
But in 2021, the Science of Scare Project took a more scientific approach. The Project measured heart rate elevation in 250 volunteers while watching 40 scary movies, and the scariest – measured by increased beats per minute – was a low budget 56-minute thriller you might not expect. The full rankings, with beats per minute spike chart, can be found here.
The movie industry got a different scare last month. Usually, we’re looking for ways to preserve independent contractor status. But in this case, a script writer’s independent contractor status may allow him to take back the copyright to the script, since 35 years have passed since its publication.
In a case called Horror Inc. v. Miller (yes, really), the Second Circuit Court of Appeals ruled that Victor Miller, who wrote the script for Friday the 13th, could legally reclaim copyright on the original screen play. After 40 years, he can take it back!
This surprising outcome is no surprise to those who know the intricacies of the U.S. Copyright Act. The Act says that authors who executed a license or granted a copyright transfer after January 1, 1978, can terminate the license or grant 35 years after the original transaction. The author has five years to provide notice of termination, and Miller provided that notice in 2016, 36 years after the 1980 film was released.
Horror, Inc., which owns the rights to Friday the 13th, argued that the script was a “work made for hire” and that Miller was acting as an employee under federal labor law when he wrote the script. Miller was a member of the Writer’s Guild of America, and the film’s rights holder had registered the screenplay as a work made for hire.
But the Second Circuit Court of Appeals ruled that the test for “employee” under federal labor law is different than the test under U.S. Copyright law. Federal labor law tries define employment broadly, in a way to protect workers and their right to organize. In contrast, U.S. Copyright law applies a narrower interpretation, designed to protect authors. Even if Miller was an employee under labor law, that didn’t make him an employee under copyright law.
The Court looked at five factors for determining whether the screenplay was a “work made for hire,” and the Court ruled that the test was not met. Miller was not an employee under the U.S. Copyright Act, even if he was an employee under federal labor law.
It is here that I strongly disagree with the Court’s analysis. The test for employment status under federal labor law is fundamentally the same as the test under the Copyright Act. Both tests seek to apply the common law of agency, and both are Right to Control Tests. The Court’s attempt to distinguish between the tests falls flat, in my mind, and it appears to me as if the Court made up its mind first and then tried to fit the desired result into a legal framework that would justify the outcome. If Miller was an employee using the common law agency (Right to Control) test that applies to federal labor law, he should have been an employee under the common law agency test that applies to copyright law. (Fun fact: Miller signed a document called “Employment Agreement,” but the Court was not swayed.)
Since Miller wrote the screenplay as an independent contractor under the Copyright Act, the Act grants him the right to cancel the transfer after 35 years, and he properly served notice of his intent to do so. Horror, Inc. is going to lose the copyright to the film.
Copyright termination cases are starting to pop up more frequently, posing a real threat to rights holders in the film and comic book industries.
When engaging a writer, businesses need to weigh the benefits of retaining an independent contractor with the risks. For commercials or social media posts with short-term value, retention as an independent contractor is likely the best path.
But with movies or other assets that are likely to have value for 35 years or more, retention as an independent contractor leaves open the risk that the writer can reclaim the copyright after 35 years. Buyer beware.
The scariest horror movies have plot twists and unexpected scares. For many rights holders, the idea that a script writer could reclaim copyright after 35 years is the kind of scare they could do without. Heart rates among movie rights holders are increasing with this decision.
Content creators need to know what they’re getting into and need to understand the long-term risks.
In 2017, the Fyre Festival failed spectacularly after all sorts of social media influencers touted it as the must-attend party of the year. Documentaries on Hulu and Netflix tell the story in all its gory detail, and you can see the videos that hyped the event that wasn’t.
Despite that epic fail, the use of social medial influencers continues to be a powerful form of marketing. But when contracting with a social media influencer, beware. There are legal traps for the unwary.
For those of you who missed the social media influencer webcast on September 28, here are five tips to help prevent your social media influencer from being misclassified as your employee.
1. Whenever possible, contract with the influencers’ loan out company instead of the influencer as an individual. This is especially important if the influencer is a member of SAG-AFTRA and union pension and health contributions may be in play.
2. Limit control over things you don’t need to control. Yes, you can put parameters around the influencer’s messaging to protect the brand, and it’s ok to require the influencer to follow the FTC Guides, to avoid use of nudity or profanity, to avoid discriminatory or harassing language, and similar reasonable guardrails. But don’t get sloppy and start requiring the influencer to use your equipment or work from your facility. Be careful about open-ended contracts that are terminable at will. Don’t overreach in exerting control over when and where the. work is performed. Consider all of the Right to Control Test factors.
3. Remember that the law decides whether it’s employment, regardless of what the parties agree. And the Right to Control Test is not the only game in town. The Economic Realities Test will apply for determining worker status under federal wage and hour law and some state laws. More troubling, ABC Tests in California, Massachusetts, and other locations raise the bar significantly and make it much harder to maintain an independent contractor relationship. If the law says that it’s employment, then it’s employment. The labels you put in your contract don’t matter.
4. Avoid terminology that sounds like employment. “Retain” the influencer, not “hire.” “Terminate the contract,” instead of “fire.” Pay a “fee,” not a “wage.”
5. Pay by the project, not by the hour, whenever possible. Method of pay is a factor in many of the classification tests, and payment by the hour is one factor that’s suggestive of an employment relationship.
For more tips about how to properly engage a social media influencer, including how to make sure you follow advertising laws and avoid misclassification risks, tune in to the webcast.
One of my favorite twitter accounts is @ACrimeADay, which reminds us of arcane things that are against the law. A few recent gems:
18 USC §1865 & 36 CFR §2.16(f) make it a federal crime to make an unreasonable noise while a horse is passing by in a national park.
42 USC §271(a) & 21 CFR §1250.44(b) make it a federal crime for an airline to provide a brush for the common use of passengers on a flight.
16 USC §707 & 50 CFR §21.55(c)(2) make it a federal crime to kill a barn owl in Hawaii by shooting it, unless you use nontoxic bullets.
There are lots of ridiculous laws. If it’s up to the NLRB’s new General Counsel, we’re about to see another one — and it may ruin college football as we know it.
In a memo issued last week, the NLRB’s General Counsel and chief prosecutor, Jennifer Abruzzo, announced that her office now take the position that college student athletes are employees of their universities, with full rights to bargain collectively, strike, and file unfair labor practice charges.
Her analysis is based on a Right to Control Test. She thinks that universities control the working conditions of student-athletes in a way that makes them employees under the test. She explains this in the memo, if you care to read the details.
The memo also takes the position that universities’ use of the phrase “student-athlete” instead of “employee” is itself an unfair labor practicebecause it intentionally misleads these students employees into thinking that they do not have Section 7 rights. Her position is directly contrary to current Board law, established in Velox Express (discussed here).
And it gets worse. Because the NLRB has jurisdiction over private employers but not public ones, her position applies only to private universities, not public ones. That means — if her memo becomes law — that Northwestern’s football players are employees, but Ohio State’s are not.
And she sets up the NCAA as a joint employer, alleging that it too controls the working conditions of these students.
Abruzzo is a former union lawyer, so it’s not surprising that she subscribes to the worldview that everyone’s an employee, but for this to be the official prosecutorial position of the Board is inane. With Democratic Board appointees now holding a 3-2 majority on the Board, it feels like only a matter of time before the right case comes along and the NLRB rubber stamps her position as Board law.
Let’s imagine how this plays out in real life:
It’s the end of a long practice, and two players tell Coach they’re not going to run that last required wind sprint because they think it’s just too much. Coach says to run anyway because I’m the coach. Coach disciplines the players by not playing them or demoting them on the depth chart or whatever. Based on the memo, that might be an unfair labor practice because the employer is taking adverse action against employees for engaging in protected concerted activity.
Coach tells his team not to criticize the program publicly because we’re a team and we need to speak with one voice. Based on the memo, that could be an unfair labor practice because employers cannot prohibit employees from speaking out collectively about working conditions.
When the fifth- and sixth-string senior running backs refuse to show up for practice as a way of protesting Coach’s decision not to play them in last week’s blowout win, Coach tells them they’re off the team. Under the Abruzzo memo, that might be an unfair labor practice.
At a press conference, the athletic director is asked about team discipline and responds that these are “student-athletes” and not “employees” and they’ll do what Coach says and they’ll do it quietly, without objection, if they want to play. Under the Abruzzo worldview, that sounds like an unfair labor practice too.
Let’s play this out a little further. If the reason student-athletes are employees is because of the Right to Control Test analysis, then wouldn’t the same analysis apply to other laws that use the Right to Control Test? The Affordable Care Act and ERISA use Right to Control Tests. Could it become the law that student-athletes must be made an offer of coverage under ACA? Would the school have to allow the players to participate in employee retirement programs?
And what about the Economic Realities Test used for determining whether someone is an employee under the Fair Labor Standards Act (FLSA), which requires minimum wage and overtime? The Economic Realities Test is generally viewed as more expansive and inclusive than the Right to Control Test. If Abruzzo’s position is embraced by the NLRB and later affirmed by the U.S. Courts of Appeal, would that open the door for requiring private universities to pay student-athletes a minimum wage and overtime?
This is sounding like Absurdistan (which, by the way, it the title of a pretty entertaining book by Gary Shtenygart).
I’m making unreasonable noises just thinking about all of this. Good think I’m not in a national park with a horse nearby or I’d really be in trouble.
I just got back from running in a 200-mile relay, Muskegon to Traverse City, with a group of college friends. I ran three legs of 4, 4, and 5 miles. I had the easiest set of three legs among the 12 runners, but I’m happy just to have finished. It was great to see everyone, and I was able to disconnect from work life for a few days.
So, what I’m saying here is, I had a better weekend than the guys I’m about to write about. And for them, there’s no running away from their problems.
In yet another exotic dancer case to hit the news, the performers at King’s Inn Premier Gentlemen’s Club in Massachusetts are about to score a $292,000 settlement in a claim that they were misclassified as independent contractors. A hearing to approve the settlement is scheduled for this week.
There seem to be a lot of exotic dancer cases in the annals of independent contractor misclassification, and the clubs seem to lose their fair share of these cases. This case, like most of the dancer cases, is a wage and hour case. The dancers claimed they were denied a minimum wage and overtime pay, in violation of the Fair Labor Standards Act (FLSA). The club claimed the dancers were independent contractors and therefore were not covered under the FLSA.
But why do you care about a strip club exotic dancers case? Two reasons:
Second, any settlement of an FLSA lawsuit must be approved, and it becomes public record.
You can read more about the first point here, in a collection of posts about this test and how it is used to determine whether someone is an employee.
The second point deserves a bit more attention, though. Most types of litigation can be settled in a private settlement agreement. An FLSA case cannot be. The law requires the settlement of an FLSA case to be approved by a judge, and there is a public hearing at which the settlement terms are considered.
Once you get sued for an FLSA violation, it’s very hard to get out of it with anything resembling confidentiality. This is the kind of claim you want to avoid in the first place.
How do you avoid an FLSA claim when you have independent contractors?
Be proactive. Evaluate your relationships using the Economic Realities Test and see if they hold up.
Review your contracts and see if they can be adjusted to better memorialize the facts that support independent contractor status.
Consider obtaining representations from the contractors up front to determine whether they really do operate independently.
Don’t wait until its too late to take action. You can’t just run away from an FLSA case.
More than 67% of US marketers will use some form of social media influencer marketing this year, according to emarketer.com. While I can’t vouch for the numbers, I do believe that putting numbers in my attention-grabbing lede makes you want to keep reading and, besides, we all know it’s a lot so does the exact number really matter anyway?
While top social media influencers include Cristiano Ronaldo, Justin Bieber, and Ariana Grande, there are also niche social medial influencers with more targeted audiences, such as the gluten-free or plant-based foods crowd.
Whatever your social media marketing strategy, engaging a social media influencer involves legal risks. Some of these risks are pretty intuitive, such as laws relating to testimonials. You need to learn those rules and follow them. Other risks are a bit more hidden, and that’s where I come in.
While your relationship with a social media influencer is intended to be an independent contractor relationship, you need to avoid exerting so much control that you risk the influencer being deemed your employee. Yes, the Right to Control Test applies here too.
You need to protect your brand, and your contract with a social media influencer should do that. But where do you draw the line? You need to install guardrails to protect the integrity of your brand, but if you exert too much control, it’s possible to convert your social medial influencer to your employee, entirely by accident.
You can register here for free. 1.0 CLE credit is available.
Free Useless Tip: One surefire way to avoid independent contractor misclassification is to use a social media influencer that’s not human, and there are several. Dogs, cats, and even a South Korean avatar have all built loyal social media followings. In the webinar we’ll be focusing on the use of human influencers, but you’re welcome.
If background checks were run on bulls, you probably wouldn’t hire Bodacious for rides at your child’s next birthday party. Bodacious has been described by some in the bull riding community as the meanest, most dangerous bull that ever was.
Fortunately, the identity of bulls with a history of violence is readily attainable, probably through some kind of bull riding database available to those in the industry. Or wikipedia.
When it comes to identifying humans with a history of violence, we can run criminal background checks. We do this for employee applicants and often for independent contractors. When using staffing agencies, we ask the agencies to run background checks for their employees before sending them to perform services onsite at our businesses.
Except that a recent Court of Appeal ruling in California may have just broken the criminal background check process throughout the state.
In a case called All of Us or None, the Fourth District Court of Appeal ruled that it violates the California Rules of Court, Rule 2.507(c), for Superior Courts to maintain criminal case databases that are searchable by date of birth or driver’s license number.
If you want to run a criminal background check, you need additional identifying information such as date of birth or driver’s license number. There are thousands of people with identical surnames and similar sounding full names. According to mynamestats.com, there are 81,585 Californians with the surname Gomez, and 5,277 of them are named Maria Gomez. Check out this map to go down a state-by-state rabbit hole. Background check companies need additional identifying information to make sure they’re reporting on the right person.
Rule 2.507(c) says that certain types of information must be excluded from “court calendars, indexes, and registers of actions.” Taking a waaaay-broad interpretation of this rule, the Court of Appeal held that the “excluded” categories can’t be used at all, not even when searching for criminal records. Other “excluded” categories of information include such important differentiators as ethnicity, age, and gender. The Riverside Superior Court, defending the legality of its searchable database, argued that Rule 2.507(c) is intended to prevent people from searching for the excluded information in a database, but it cannot possibly be intended to prohibit searches when the searcher already knows that information.
The Court of Appeal disagreed.
Under federal law, a background check company must maintain reasonable procedures to ensure that the information they report is accurate. Using names alone would obviously produce absurdly unreliable results. Just ask anyone named Maria Gomez. Most Maria Gomezes are undoubtedly wonderful people and don’t want their background check reports to show that some other Bad Maria got into criminal trouble. But if a background check company cannot use important identifying and differentiating information it already knows to help verify someone’s identity and criminal record, how can it provide reliable reports in California at all?
I’m not sure how that’s gonna work. Leave it to California to break the whole background check system. We’ll see if the courts and background check companies find a way around this.
Meanwhile, if you’re running background checks in applicants or independent contractors in California, expect some delays, thanks to this ruling. And if you’re planning to have livestock at your child’s next birthday, may I suggest a pony?
Sometimes injuries can be reasonably expected, sometimes not.
A good example of when injuries can be expected is the annual Bagwal festival in northern India. This year’s festival was described by Indian media as “a low-key affair” with only 77 of the 300 participants sustaining injuries. Wait, what?
At Bagwal, participants divide into four clans and hurl stones at each other to please a deity. According to this report, “The fight continues until a priest determines that enough blood has been shed in honor of the goddess Maa Barahi and demands to stop the fight.”
A good example of when injuries are not expected is when you retain an independent contractor to perform some sort of work on your property. Sometimes there are known hazards on the property. Sometimes there are no reasonable safety precautions that can be taken to minimize the hazard. For example, suppose you retain a contractor to fix a known safety risk.
The question: When an independent contractor gets injured by one of those known hazards, who is liable?
The California Supreme Court recently addressed this question in a case with significant ramifications for business owners, property owners, and independent contractors.
The answer: The contractor is liable, not the property owner — but this assumes the contractor is properly classified as an independent contractor.
The rationale: Like in many states, California law presumes “that a hirer of an independent contractor delegates to the contractor all responsibility for workplace safety.” This doctrine, known in California as the Privette doctrine, means that a hirer is typically not responsible for injuries suffered by an independent contractor.
The Privette doctrine makes sense. It arose out based on four basic assumptions:
Hirers have no right to control an independent contractor’s work.
Contractors can factor in the cost of safety precautions and insurance in the contract price.
Contractors are able to obtain workers’ compensation coverage to cover any on-the-job injuries.
Contractors are typically hired for their expertise, which includes knowing how to perform the contracted work safely.
There are two exceptions:
A hirer may be liable when it exercises control over any part of the contractor’s work and negligently exercises that control in a way that contributes to the injury.
A landowner who hires an independent contractor may be liable if the landowner knew, or should have known, of a concealed hazard on the property that the contractor did not know of and could not have reasonably discovered, and the landowner failed to warn the contractor of the hazard.
In Gonzalez v. Mathis, the court was asked whether a third exception should be recognized when injuries “result from a known hazard on the premises where there were no reasonable safety precautions it could have adopted to avoid or minimize the hazard.”
The court declined to recognize this exception, holding that in this situation, the contractor is liable, not the hirer. Rules may vary in other states.
What should businesses do to protect themselves, in light of this ruling?
Make sure your contractors are properly classified as independent contractors under the applicable legal test. California uses an ABC Test for making this determination. Other California laws, such as Labor Code 2750.5 and 2810.3 complicate the analysis.
Make sure your contractors are licensed and insured. Licensing by the Contractors State Licensing Board is required in California for anyone who contracts to perform work on a project that is valued at $500 or more for combined labor and materials costs.
Do not exercise control over your contractors. Defer to their expertise.
Disclose known hazards, especially those that are not readily visible.
And if you’re looking for repair work to be done at or near a Bagwal festival, don’t forget warn your contractor about the risk of flying stones.